Reimbursement Update

A recent survey found that American businesses loses billions of dollars each year in theft and loss. The home medical equipment (HME) industry is not exempt from this problem and contributes to this staggering statistic. As a result, providers are not only required to mind the latest rules and regulations handed down by HCFA, but they must also watch their backs. In other words, in this type of business environment, efficiency may not only mean new processes and better flow, it may also entail taking "stock" of your own employees and their behavior on and off the job.

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To understand what needs to be looked for, the true meanings of theft and loss should be understood. An accepted definition of theft is "the act or instance of stealing," and loss is defined as "a losing or being lost." In HME terms, theft can be as direct as stealing money from the cash register or as indirect as punching in early while eating breakfast and chatting with coworkers. Even carelessness and sheer laziness can be theft. Do you ever observe your own staff during the work day? Do you ever appear suddenly at the end of the day or at odd, unannounced times? If you do, you will undoubtedly learn more than you ever imagined about the behavior of the employees in your company.

What to Look For

One HME provider entrusted his company to his most senior employee of 15 years. Included in this man's responsibilities was closing the store every night. Unfortunately, it also provided him with what he saw as a great opportunity. Every night after everyone had gone home, this employee ran his own black market business selling company equipment to competitors looking for a better buy on concentrators. He did so for months. Fortunately for the supplier, one of the black market machines broke down and the manufacturer was called to replace it. When the manufacturer asked for the serial number, it became evident that the equipment was not sold to the party calling for repairs. The legitimate supplier was called and the operation was uncovered. This cost the supplier tens, if not hundreds, of thousands of dollars.

Lesson/Moral: Track all inventory closely and monitor reports. It is not enough to say you have inventory tracking if you do not use reports to identify missing equipment. In addition, do not always have the same person close and open the store.

Stealing also manifests itself in other ways. Delivery technicians returning early from their routes and "loitering" around the premises are stealing from their employer. If there is truly nothing for them to do, you are overstaffed. Additionally, in most companies, staff punches in and begins working a half-hour later. Conversely, employees pack up their belongings for a half-hour while they talk to their coworkers about their evening's planned activities. If you multiply the number of hours lost in a productive work day, this figure can be astronomical.

Lesson/Moral: Track all time clock reports and check them against productivity. Delivery technicians' productivity can be measured by comparing time clock reports to actual route sheets.

Another area of theft occurs when employees become lazy and careless. While this is a more indirect problem, it still results in lost money. In one case, the purchasing department would order an oxygen concentrator each time they were told by an employee that one was needed. The purchasing agent would first peer into the warehouse and if he found no concentrators within eyesight, he would simply order more. After checking the warehouse more thoroughly, the manager noticed that there were 25 concentrators on repair. The warehouse staff was uninterested in repairs and took the easy way out by ordering new equipment.

In the same vein, a billing representative may deposits bills in drawers because it is easier than sending them out. In one such case, the biller knew that if she sent the invoices, she would be inundated with calls about incorrect bills. Rather than send them, she would simply conceal them in her desk. Several months later after the employee resigned, a new employee noticed the drawers stuffed with invoices dating back six months! The attempt to recoup the money was nearly futile - try collecting from patients on a fixed income six months worth of outstanding invoices - but it taught management a lesson: Use computer generated reports to track unused equipment (inventory printouts) and patient receivable reports to find outstanding balances greater than 30 days old. Waiting six months to review patient receivables is inexcusable and reflects poorly on management, not just staff.

Lesson/Moral: Monitoring through reports is the only way for an HME manager to maintain control over operations.

A more blatant and covert form of stealing occurs with savvy, clever minded employees who have ulterior motives. In one scenario, the delivery technician manager would take calls for equipment pickups rather than have the customer service staff do it. He alleged that it was easier to schedule his drivers and their routes if he fit it into their day's work. Instead, he would get the call for the pickup and physically pick up the equipment himself after hours. Instead of returning the equipment to the warehouse, the manager sold it. The only reason this problem persisted was that no one ever used the inventory tracking module on the computer. The owner caught up with the manager when he found himself in a cash flow crisis even though revenue was record high.

Lesson/Moral: Study inventory reports and simply peek in the warehouse to give yourself a feel for the state of your inventory.

Another conniving employee stole shamelessly from a provider by virtue of his position as accounts receivable manager. As the manager, he would check all the cash collected at the time of delivery or pickup against the amount listed on delivery or pickup ticket. Rather than depositing the cash in the cash register as a "received on account," he would write off a portion of it and pocket that same amount. Because the dollars were negligible and seemingly insignificant, he was not caught for a while. After he became greedy and took more substantial amounts of money more frequently, senior management noticed irregular cash collections. Only after comparing the actual tickets against the bank deposits and adjustment reports did they learn of the problem.

Lesson/Moral: Never have the same person handle cash and writeoffs. An audit trail should be required so that the person who touches the money neither deposits nor writes off money. Checking regularly for patterns and changes in management reports would also show symptoms of this type. Additionally, check your bank deposits against your posted payment journals.

A nine-year employee was made manager over accounts payable. She had the new position for a few years when unbeknownst to the owner she got involved in drugs. She was spending her paychecks on drug purchases before she was even paid. Soon she was strapped for cash. On the job she performed well, but outside of work she was a criminal. Desperate for cash, she decided to make out a small check to a vendor and have it signed by the owner only to remove the "pay to" name once it was signed. She invariably changed the "pay to" name to her own and cashed the check. For some odd reason, the bank did not pick this up and she found an easy way to support her habit. This went on for months because as vendors would call screaming for their payments, she would appease them by sending part of their outstanding money. She was finally caught when a vendor called and she wasn't there. Defiant, the vendor asked why they hadn't received a payment in over six months. The owner happened to take that call and remembered signing a check for that same vendor the week before. Hundreds of thousands of dollars later, the employee was caught and served time in prison.

Lesson/Moral: Always check your accounts payable reports against current invoices. Do not assume that a long standing employee will be forever loyal.

The ultimate lesson in all of this is to be proactive, stay on top of reports and look for changes in staff behavior. If you do so, you will not be among the growing number of companies contributing to billions of dollars in lost money.

HOW DO YOU KNOW IF YOUR EMPLOYEES ARE "STEALING," DIRECTLY OR INDIRECTLY? Use this checklist to answer your own questions.

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Do you??

Should be Yes

Should be No

Y or N

In my company

Not sure

Do you spontaneously "pop" in early or late in the day?

Do you compare reports to actual productivity logs such as route sheets?

Do the same employees touch your money and post receipts into the computer or make the deposit?

Do you have authorization levels for writeoffs whereby the person writing the writeoff does not also authorize it? Are the levels of authorization based upon dollars to be written off?

Do you have a person responsible for adjustments/writeoffs separate and apart from the person responsible for cash posting/handling?

Do you examine inventory through reports such as "Items Below Reorder Levels" or "Items on Repair?" Do you have someone to manage the loaner equipment?

Do you spot check or randomly audit delivery and pickup tickets to ensure deliveries and pickups are actually made?

Do you check bank deposits against money posted to your computer?

Do you review time clock reports and look for obscure patterns or trends in hours worked?

This article originally appeared in the November 1999 issue of HME Business.

About the Authors

John P. Bachner is executive vice president of ASFE/The Best People on Earth. He authors several columns for engineers and allied professionals and is a frequent seminar leader and instructor. ASFE is a not-for-profit trade association comprising geoprofessional, environmental, and civil engineering firms, design/build contractors, and educators.

Julie Phillips is the director of communications at the American Association for Homecare in Alexandria, Va. To learn more about competitive bidding visit AAHomecare online at, or call (703) 836.6263.


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